CPIM Practice Exam

What is meant by available inventory?

1. The total stock of all products in the warehouse

2. On-hand inventory minus allocations and backorders

3. The quantity of products scheduled for shipment

4. The inventory that is reserved for future orders only

The correct answer is: On-hand inventory minus allocations and backorders

Available inventory refers specifically to the amount of inventory that is accessible and can be allocated for immediate use or customer orders. This definition is accurately captured by the idea of calculating on-hand inventory and subtracting any allocations and backorders. When determining available inventory, it is crucial to take into account the items that are committed to fulfilling existing orders (allocations) as well as those orders that cannot currently be filled due to insufficient stock (backorders). Therefore, the formula for available inventory effectively reflects the true quantity that can be used for new orders or demands, providing a realistic view of what is on hand versus what is already promised to customers. In contrast, the other definitions do not accurately describe the concept of available inventory. Total stock of all products in the warehouse includes items that are not currently available due to allocations. The quantity of products scheduled for shipment focuses only on outbound inventory, which may not include what is readily available. Lastly, inventory reserved for future orders may not be available for immediate use, as it is set aside for anticipated demand rather than current needs.